Basic Building Bit 1

Basic Building Bit 1

Tenant Allowance

This is the sum of money granted by the landlord/developer to pay for a portion of modifications that a tenant may require. It is typically a per square foot allocation. Tenant allowances range widely from area to area and change with economic conditions. They also vary with venue and market sector. A competent broker should be able to provide a comparison or matrix of typical tenant allowances by product type, market sector, venue, and market timing. In a heated market with little vacancy and high demand, expect the tenant allowance to be low; and in a down market or recession, expect a higher tenant allowance.

Understand at what point you, as a tenant, will receive the tenant allowance dollars. It is also not uncommon for landlord/developers to review your tenant needs and provide the actual modification on your behalf within a certain dollar limit or specification rather than provide a cash allowance. Landlords tend to provide turn-key spaces in lieu of tenant allowances when they feel they have a team in place that they know and trust to provide the design and construction services, and when they feel they will reduce their costs and deliver the project in a more timely fashion than if the tenant is left to do so on their own. Either approach can result in a good outcome for both parties.